The EU has been one of the most important export markets for Vietnamese textiles and garments for many years.

In terms of value, Vietnam's textile and garment exports to the EU have witnessed significant growth over the past five years, increase from 5.14 billion USD in 2018 to 7.3 billion USD in 2022 (ITC Trade Map data). The average export growth rate of finished textile and garment products from Vietnam to the EU during the 2018-2022 period reached 10.9%, with export value in 2022 experiencing remarkable growth of 24.4%. Considering only garments (the primary subject of the EUSSC), according to statistics from the Ministry of Industry and Trade, in 2022, Vietnam's garment export turnover to the EU reached over US$4.38 billion, a significant increase of 34.7% compared to 2021, and accounting for 11.67% of Vietnam's total global garment export turnover.

Vietnam's textile and garment market potential in the EU is also assessed as very promising, given that the EU is the world's second-largest importer of textiles and garments, while Vietnam's finished textile and garment products only account for 3.2% of the EU's total imports.

More importantly, with the EU pioneering sustainable textile issues, it is highly likely that other textile and garment export markets for Vietnam, especially the US (with a turnover of US$17.36 billion, accounting for 46.21% of Vietnam's total garment exports in 2022), will also follow suit in the coming years.

Therefore, green transition in line with the EUSSC guidelines is not only a matter of survival for Vietnamese textiles and garments to maintain access to the EU market but also a crucial condition for Vietnam to adapt and continue to thrive in other important export markets amidst the global green transition.

With the EUSSC's planned actions encompassing all stages of the textile and garment value chain, green transition to meet the EUSSC requires comprehensive and holistic steps in all aspects, from supply sources and production environments to responsibility in textile waste treatment.

This demands significant effort and conversion costs for the Vietnamese textile and garment industry, particularly in the following areas:

- Restructuring and technological transformation of production lines to meet requirements for product quality, packaging, and labeling.

- Costs associated with adjusting and upgrading working conditions to comply with high labor standards.

Nevertheless, in the long term, green transition according to the EUSSC is expected to bring certain benefits to Vietnam, especially:

- Benefits for workers and the environment where the industry operates through a trend of reducing negative environmental impacts and improving working conditions for laborers.

- Driving investment attraction, particularly foreign direct investment, from the production transformation process, the establishment of new production lines, and the market opportunities arising from this process.

At the same time, from a practical perspective, the Vietnamese textile and garment industry is also considered to have some advantages in implementing green transition in general and in accordance with the EUSSC guidelines in particular:

- In recent years, to adapt to green movements among local consumers, EU customers (importers, fashion brand owners) have been far ahead of competent authorities in the EU in terms of green transition. For a long time, major EU customers have set certain green standards for their order-based processing manufacturers in third countries. Consequently, a significant portion of Vietnamese manufacturers and exporters have been implementing various green standards in their textile and garment production processes, most of which are within the current action guidelines of the EUSSC. Therefore, textile and garment businesses exporting to the EU or developed markets may not find it too difficult or unfamiliar to implement the specific requirements of the EUSSC.

- With the characteristic of primarily processing based on designs and orders from EU brands, the group of processing textile and garment manufacturers and exporters in Vietnam may not be directly subject to certain specific green requirements (e.g., eco-design, standards for chemicals/microplastics in fabrics, textile labeling), as these are typically handled/specified by the customers. Of course, even for this group, in aspects related to direct production processes or extended responsibility for textile waste, textile and garment manufacturers and exporters remain the main actors in implementing relevant green policies, not only from a legal perspective (compliance) but also as a crucial factor in competition (to attract orders from EU customers).

Announced in late 2022, the EU Strategy for Sustainable and Circular Textiles has been and is being realized by the European Commission through draft regulations closely following the outlined guidelines, which will soon be adopted. Once these regulations take effect, textiles and garments imported into the EU will be required to comply without any alternative. Not only the EU but other developed markets, especially the US, Vietnam's largest export market, are also developing similar plans, albeit possibly later. Therefore, Vietnamese textile and garment businesses currently exporting or planning to export to the EU market in particular and developed markets in general need to promptly study the EUSSC to identify the anticipated future green standards of the EU and similar markets, thereby making necessary preparations and taking action for timely compliance. Relevant agencies and organizations in Vietnam also need to provide appropriate support for textile and garment enterprises during this complex, costly, and challenging, yet inevitable, transition process.

Source: Center for WTO and International Trade - VCCI 

• Current Status of Green Transition in the Vietnamese Textile Industry